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The Unintended Consequences of the New Oklahoma Real Estate Contract Forms

The unintended consequences of the new Oklahoma real estate contract forms are numerous and complex. On Friday the Oklahoma Real Estate Commission (OREC) unveiled the new real estate contract forms. The OREC has recommended that licensed real estate brokers and their associates begin using the new forms on November 1, 2009. It’s not too late to comment and request that changes be made. Our future economic well being and our national security could potentially be at risk.

The new forms will put into limbo all mineral rights that are not now active or leased, because unproduced oil & gas rights are not tracked nor taxed. Mineral rights will be put in limbo where no one will know what is going on until the State of Oklahoma comes along and takes them as unclaimed property, thereby depriving the landowners of the State of Oklahoma of a significant portion of their wealth.

The county tax assessors only track and tax the surface owners. Oil & gas producers track producing mineral holders in order to distribute royalty checks. Because they are never taxed and do not receive royalty checks, descendants of unproduced mineral holders are unaware of their ownership of severed oil & gas rights. Moreover, privacy laws make it difficult for landmen to find heirs. Detailed census data is closed for seventy years — that’s three generations of tough genealogical work for anyone trying to find holders of mineral rights.

The lawyers, the landmen, the abstract companies, and the title insurance companies will be the big winners of the new contract forms. The consumers, landowners, undeclared mineral holders, and real estate brokers who do not broker oil & gas rights will be the biggest losers.

Potentially the economic engine of the State of Oklahoma will be crippled to the extent that the state may eventually have to quiet title undeclared mineral holders in order to prevent foreign investors from quietly investing in these precious personal property rights that will be regularly severed through the use of the new contract forms.

Only the Osage Nation, who already owns most of the mineral rights in Osage County (all but about 800 acres or so) will be able to conduct business unimpeded by legal problems.

Those of us who sell rural land have been aware of the problems caused by the previous Vacant Land contract forms and have been hoping to get them changed so that the personal property rights would no longer be severed by the vacant land contract forms for “surface rights only.” Instead we were shocked to discover that all the new contract forms are written for the purchase of surface rights only. Knowlegable brokers and associates will be crossing out certain words in the new contracts. However, that will not prevent damage being done by ignorant real estate sales associates who will not be realizing that they are not representing the best interests of their buyers and their descendants.

Does this mean that the OREC wants all real estate brokers and associates using these new forms to be representing their clients as transaction brokers? This must be the case, because by law a single party broker must advocate for and work in the best interest of their clients. Any buyer’s broker using the new forms without alteration will not be representing the best interest of their buyers and therefore will be leaving themselves open for legal action if they act as a single party broker.

Yeah, yeah, yeah, how can that be? Just wait until the D6 dozers and the drilling rigs start pulling up on your buyer’s land! They’ll cry when they realize that the mineral estate is dominant over the surface estate. Then they’ll call their lawyer who will then call you. You will be responsible for not having explained to your buyer the unintended consequences of their having purchased only the surface rights.

At least with the old forms our buyers were able to purchase all of the rights owned by the seller — however many and kind of rights those may have been.